FSA Annual Report 2006/07 - Better Regulation Ltd

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116 Section six – Appendices Appendix 2 The valuation of the property is a key part of the home reversion transaction and we have introduced a number of measures to ensure that valuations are independent and fair to both parties. The Panel supported our original proposal to make the valuer the agent of the consumer. However, firms made it clear that they would commission their own valuation rather than rely on a report commissioned by the consumer and we concluded that this proposal could, in practice, result in delay and additional cost for consumers. So instead of requiring that the valuer be the agent of the consumer, our rules require firms to ensure that the valuation is carried out by a competent valuer who owes a duty of care to the consumer in respect of the valuation and provides the consumer with access to an independent complaints procedure capable of providing a remedy binding on the valuer. Home purchase plans Home purchase plans do not involve the provision of credit and so we do not consider it appropriate to require firms to quote an APR. Instead, firms have the option of including an APR equivalent. There is however a requirement on firms to quote two other important cost comparitors in the financial information provided to consumers: the total amount to be paid by the consumer under the plan; and the pound payable per pound provided under the plan. These comparitors are also required under the mortgage regime and the information is required to be set out in a similar prescribed manner, enabling a consumer not only to make meaningful comparisons between home purchase plans but also between home purchase plans and mortgages. Closed with-profit funds We acknowledge the Panel’s concerns over the information provided to withprofit policyholders after the point of sale. In our Business Plan 2007/08 we said we would do further work so that with-profit policyholders, in both open and closed funds, receive clear and accessible information to help them make informed decisions about whether to keep or surrender their policy. In May this year we issued the findings from our review; we concluded that some communications to policyholders do not meet Principle 6 (treating customers fairly) or Principle 7 (paying due regard to the information needs of customers). More generally (and not closed fund specific), there is an issue with firms maintaining controls so that products are managed consistently with contractual obligations (highlighted in a Dear CEO letter in 2004 and repeated in the Life Sector Newsletter April 2007). Supervisors will be challenging senior management of life insurers on the actions they are taking in response to these issues. In our May Insurance Sector Briefing we stated that insurers’ responsibility to provide communications that are clear, fair and not misleading extends to being proactive in some key respects. Specifically we put forward the view that insurers should consider informing customers about contractual breakpoints (which the customer cannot reasonably be expected to recall or know about already) that may have a material impact, such as Market Value Reduction (MVR) free-dates.
Section six – Appendices Appendix 2 117 Our research into the availability of ongoing advice showed that there is some reluctance on the part of advisers to engage with with-profits policyholders. The research highlighted several observations on the role of the FSA – 61% thought FSA should be the body primarily responsible for giving advisers guidance on how to advise clients about their with-profits product, but 63% said there was nothing else we should do beyond what we already do. Only 6% thought the guidelines were unclear and only 9% thought clearer/better guidance from FSA would help matters. There are a number of statutory safeguards for policyholders at the time of mergers, sales and consolidations surrounding changes in control and Part VII transfers. In the case of the latter, these safeguards include the appointment of an independent expert, the right of policyholders to be heard in Court, and the FSA’s opportunity to comment on all policyholder communications before they are issued. We are pleased that the Panel considers our approach to be logical. We give careful consideration to the likely effects on policyholder interests and do object to proposals which appear to be detrimental to their interests or to have a material adverse effect on a particular group of policyholders. State second pension In May 2007 we concluded our thematic work reviewing past selling standards in relation to Appropriate Personal Pensions (APP) sold since 1988. We concluded that there is no evidence of widespread mis-selling based on the regulatory standards that existed at the time. However, a small proportion of sales made (1.5% of policies) involved consumers who were above the age standards set by individual firms at the time and these consumers may be at particular risk of having been given inappropriate advice. We carefully considered what form of regulatory intervention would be the most effective and proportionate, particularly as there are reasons why consumers may still have bought an APP notwithstanding their age at the time. In reaching this decision, we took account of a number of factors which we have previously published, including the scale of the problem, the average loss per consumer and the administrative costs involved in getting any due redress to consumers. We decided that the most proportionate response was to: • publish a step-by-step guide for consumers explaining the issue, how to find out whether they are affected and, if so, how to complain: http://www.moneymadeclear.fsa.gov.uk/pdfs/s2p_wrongly_advised.pdf ; and • continue to monitor the number of complaints received by the FOS in this area in case these indicate issues with the past sales of particular firms or the way in which firms are handling complaints. Where issues are identified firms will be responsible for dealing with those issues as part of their ongoing obligations to treat their customers fairly. In May 2007 we also updated our factsheet which helps consumers with their annual decision about whether to contract out of the additional state pension. It is available at: http://www.moneymadeclear.fsa.gov.uk/pdfs/contracting_out.pdf
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FSA Annual Report 2006/07 - Better Regulation Ltd

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